Timing: Example

A tonnage tax company, Shipping Ltd, has an overseas subsidiary, Overseas Shipping SA, with an accounting date of 31 December.

Shipping Ltd elected into tonnage tax with effect from 1 January 2008.

Overseas Shipping SA has mixed (tonnage tax and non-tonnage tax) activities until July 2009, when it sells its non-tonnage tax activities to General Trader SA, another overseas subsidiary of Shipping Ltd.

During 2010 and 2011 the FA00/SCH22/PARA49 (2) conditions are satisfied.

In May 2012 Overseas Shipping acquires a freight forwarding business from a third party, and the PARA49 (2) conditions cease to be satisfied from this date.

In February 2013 Overseas Shipping SA sells the freight forwarding business to General Trader SA, and the PARA49 (2) conditions are again satisfied from that date.

Overseas shipping pays up various dividends to Shipping Ltd

On 1 June 2010 it pays a dividend out of the profits that arose in 2006 and 2007.

This dividend is not relevant shipping income as it is paid out of profits arising in a period when the recipient was not a tonnage tax company (PARA49 (2)(e)(ii)).

On 1 June 2011 it pays a dividend out of the profits arising in 2008 and 2009

This dividend is not relevant shipping income as it was paid out of profits arising in a period when the conditions were not satisfied(PARA49 (2)(e)(i))

On 1 December 2011 it pays a dividend out of the profits arising in 2010

This dividend is relevant shipping income, as it was paid at a time when the conditions were satisfied out of profits that arose in a period when the conditions were satisfied.

On 1 June 2014 it pays a dividend out of the profits arising in 2011

This dividend is relevant shipping income, as it was paid at a time when the conditions were satisfied, out of profits that arose in a period when the conditions were satisfied.